THE GOVERNMENT’S four-year austerity plan was greeted with scepticism in the international media yesterday, with many saying the proposals may deepen the State’s economic crisis.
The Wall Street Journalsaid Ireland's "deep cutbacks could backfire by weakening its economy and reducing its tax revenue, which it needs to pay off its massive national debt".
Clawing more cash out of the economy could exacerbate Ireland’s fiscal problems, it said, noting that unemployment stood at around 14 per cent. “If Ireland’s efforts slam consumer spending and hit tax revenues, it could make it harder to fix the deficit, creating a negative spiral that prevents Ireland from paying its debts without a restructuring,” it added.
A Financial Timeseditorial, headlined "The vice tightens for the Irish", was also pessimistic. "The Government's programmatic optimism notwithstanding, cuts of this magnitude could throw Ireland back into recession. That would be a tragedy: yawning as it is, Ireland's fiscal gap is the least of its challenges; a slower pace of consolidation might have been its best bet at encouraging growth."
A New York Timeseditorial argued the bailout remedy for Greece, and now Ireland, had a fundamental flaw. "It fails to acknowledge that these deeply indebted countries will not recover until they reduce their crushing public debt, which in both cases is on its way to hit a staggering 150 per cent of gross domestic product within three or four years."
It said the “draconian austerity budgets that are the price for the rescue deals” will make things worse. “Unless they are allowed to restructure their debt, extending payouts or reducing the principal, they will hobble along for years. And any new scare, say financial problems in Portugal, would send investors bolting,” it added.
A Guardianeditorial headlined "The last gamble" opened with the observation that bookmakers Paddy Power this week became "Ireland's largest financial institution by value, overtaking the country's banks". On the National Recovery Plan, it said: "The title was optimistic, the contents apocalyptic."
In Italy, the front page headline in La Repubblicaread: "Ireland says Yes to sacrifices, the markets breathe a sigh of relief." The paper said if there was a lesson in the Irish crisis, it was that "it's not possible to offer an unlimited guarantee against the possibility of bankruptcy". Referring to Ireland's banks guarantee in 2008, the paper said the move had been, in part, "dictated by the idea that 'banks are too big to let them fail' . . . but it was also probably a reflection of the power of the banks' lobby in politics".